The five children of a woman murdered last year have been left struggling to make ends meet after her employer, Sainsbury’s, paid out a death-in-service lump sum of just £1,100. Rival retailers such as Tesco and Marks & Spencer would have awarded the family up to 50 times as much.

Pennie Davis, 47, was stabbed to death on 2 September as she tended her horses in the New Forest. The case received national media coverage. Davis had five children aged between 14 and 20, and worked at a Sainsbury’s store in Blackfield, near Southampton.

Davis’s family were left devastated by her death, but amid the grieving thought needed to be given to how the children would cope financially now that the main wage earner had been taken from them under such horrific circumstances. “As soon as my sister died it was a major financial crisis,” says Davis’s sister, Nicola Lambert. “Everyone in the family had to pitch in to keep them going.”

They were initially impressed with Sainsbury’s speedy response to their plight – but were then shocked by what appeared to be a paltry payout when compared with the estimated £36,000 to £48,000 that many other high street retailers would have paid out as a death-in-service benefit if Davis had been working for them and been earning the same salary.

While a major 2013 survey suggested the retail sector pays out an average of three times annual salary to a deceased employee’s dependants, those automatically enrolled into the Sainsbury’s pension scheme get a payment of just four weeks’ basic salary unless they elect to pay higher pension contributions.

Davis, who earned around £12,000 a year, did not have life insurance, and had been separated from the fathers of her two youngest and three oldest children for several years. A few months before her death, she had got married.

Davis’s oldest child, a daughter aged 20, has been granted guardianship of the two youngest boys, aged 14 and 15, although Lambert says: “She’s a low-paid trainee accountant – she can’t support two boys on her wage.”

Following Davis’s death the supermarket giant wasted no time in paying the four weeks’ basic salary to the family, amounting to just £1,100. Lambert says this “enabled us to feed the family and cover some basic expenses during the first terrible few days after Pennie’s death”. But she adds: “We said ‘what else is she entitled to?’ When they came back and said ‘nothing’ I was really shocked.”

It was at that point that Lambert started looking into what her sister was – and wasn’t – entitled to as a Sainsbury’s employee, and how her death-in-service benefits compared with those at other companies.

Davis began working for Sainsbury’s in April 2014 – she was training to be a personnel manager at the time of her death – and was automatically enrolled into its workplace pension scheme. Employees are given a choice about how much they pay in. The options are “Start Up”, where you pay 1% of your pay into your pension pot (with Sainsbury’s chipping in 1% too), or “Step Up,” where those who wish to, and can afford to, pay in more.

In both cases Sainsbury’s pays a lump sum if the individual dies while employed by the company, though these amounts vary hugely: while Start Up people receive just four weeks’ basic pay, Step Up employees receive a bumper six times their annual pay.

Davis was in the Start Up part of the scheme. Lambert says it is perfectly possible Davis wasn’t aware she had to pay more into her pension to receive the much higher death-in-service lump sum, adding: “My sister was struggling to support her children on a low wage and would have had little spare income to pay the required Step Up contributions.”

A few weeks after her sister’s death, Lambert asked Sainsbury’s to consider making an ex gratia payment to the family but this request was turned down. However, an application was made to the company’s hardship fund, which was granted, resulting in a separate £1,000 payment which helped meet some of the costs of Davis’s funeral.

“We were disappointed and a bit surprised at how Sainsbury’s treated us,” says Lambert. “It’s not that the company is short of money. They remunerate their employees pretty well, particularly at the high end. I did feel it was unjust.”

Sainsbury’s new chief executive, Mike Coupe, is on a base salary of £900,000, with a bonus package, and while the retailer declined to say how much his family would receive as a death-in-service payment, if it is in line with typical packages for senior executives at other companies it would run into millions.

Lambert claims Sainsbury’s staff need to be aware that if they die while working for the retailer, and they aren’t paying extra money into the pension scheme, their family could be left “impoverished”.

She adds: “We still haven’t sorted out how we are going to support the family on an ongoing basis. I know for a fact that various family members are pitching in when they can.”

So what do other major retailers offer when it comes to death-in-service payouts? Guardian Money checked out a few comparable companies. Tesco recently revealed plans to close its defined-benefit pension scheme but currently offers those enrolled into it a payment of three times their annual pay.

Likewise, all Waitrose staff are automatically entitled to a payment of three times annual salary. Marks & Spencer offers employees enrolled into its pension scheme a benefit of four times annual salary, as does Kingfisher, which owns DIY chain B&Q.

Asda told us its benefit levels vary, but that the basic provision is one times annual salary. Morrisons offers its auto-enrolled pension scheme members either their previous year’s eligible earnings or 75% of their basic pay as at the 31 March prior to their death, whichever is the greater.

Those figures suggest that if Davis had been working for Tesco, Waitrose, M&S, B&Q or Asda and earning the same salary her family could have received a payout of around £36,000, £36,000, £48,000, £48,000 or £12,000 respectively. It is less clear how much she would have received had she been working at Morrisons, though it would appear to be a few thousand pounds.

John Dean, managing director of specialist firm Punter Southall Health & Protection, told Guardian Money that in the retail sector the most common death-in-service benefit was around two to three times annual salary. He says if he was advising Sainsbury’s, he would urge it to change the way it provides life cover because the jump between a payout of one month’s salary and a payout of six years’ pay “is too great”.

He adds: “I’d say give everyone a minimum of maybe one or two times salary, and then, if you want to attract people to join the pension scheme, maybe go to three or four times salary for those employees.” Dean told us that companies such as Sainsbury’s “should be allocating the money more fairly”. Another pension expert told us: “There is an argument that having this low four weeks’ basic pay is, potentially, indirect discrimination against women, because presumably it is more women than men working on lower wages and they are more likely to be the people who stay at the Start Up level.”

Lambert, who lives in London, says her research had indicated many employers offer death-in-service cover as a free element of the employment package rather than being linked to membership of a pension. Looking at the examples above, that’s certainly the case with Waitrose, which gives it to all staff, while Tesco, M&S and B&Q give you a lump sum of either one or two years’ pay even if you are not a member of the pension scheme.

Sainsbury’s told us: “Our thoughts have been with Pennie Davis’s family and friends at this very difficult time. Since Pennie’s tragic death we have tried to support her family in a number of ways, including assisting with her funeral costs ... When Pennie joined the company in April 2014, she would have been made aware of her options regarding pensions arrangements as part of her induction. We automatically enrol all eligible colleagues into a pension scheme, with a ‘Step Up’ option available with higher life cover if a colleague would like to make additional contributions.

“While we sympathise enormously with Pennie’s family, she had not opted to join this Step Up scheme and therefore her family is not eligible for the higher death-in-service payment.”

The retailer also says that before pensions auto-enrolment was introduced in 2012 staff had to opt to join the pension and pay a minimum of 4% of pay to get the higher life cover. It has always been something that staff have had to opt into, it adds.